Kemper coal plant costs surge again

The Kemper County IGCC Project will use state-of-the-art, electric power plant technology called integrated gasification combine cycle (IGCC). The plant might look something like the Leland Olds Station, a lignite-fired electric generating station east of Stanton, N.D.

The Kemper coal plant’s Independent Monitors’ Report for the period through the end of May shows the project has crept closer to the $2.88 billion cap the Public Service Commission imposed on it.

Monitors, hired by the Commission to oversee construction, now estimate that the cost to build the lignite coal-fired generation facility will reach $2.822 billion. It’s the second consecutive report that has shown a cost overrun. The report for the period through the end of April estimated construction costs at $2.76 billion.

MPC officials originally estimated in 2009 that they could build the plant for $2.4 billion, and reiterated that stance as recently as March of this year. The latest IM report exceeds that figure by $422 million. Projections the company filed with the Commission reach all the way to the $2.88 billion cap. The project, which is scheduled to begin commercial operation, is about 25 percent complete.

In late June, commissioners voted 3-0 to wait until the Mississippi Supreme Court has its final say on litigation related to the project to take any action on proposed rate increases MPC hopes to use to pay for the plant. That decision came after a hearing in which MPC officials had asked for a 13 percent rate increase that would have generated $55 million.

Central District Commissioner Lynn Posey said in an interview that a meeting between monitors and company officials was set for last Thursday. Posey said it was a regularly scheduled meeting, but a lot of its time would be spent going over the finances of the plant. In late March, MPC officials said they could build the plant for the original cap of $2.4 billion. That changed in early May, when the April IM report revealed a $376 million overrun. The overrun was revealed 16 days after commissioners had reapproved the plant’s certificate of public convenience and necessity. The certificate had been challenged by the Sierra Club, whose longstanding opposition centers on the lack of need for the facility and its potential to pollute the area around it. The reapproval of the plant’s certificate became necessary when the state supreme court ruled 9-0 that commissioners had not cited sufficient evidence from the record in the original order.

Posey said he still supports the plant, believing its use of lignite coal represents the most sustainable way to generate dependable and cost-predictable electricity over the next 40 years. He admitted that he did have some concerns about how quickly cost estimates have escalated since April.

“Am I surprised? I’d say disappointed would be a better word,” Posey said. “I don’t know what the magic number will be, but everything over $2.88 billion will be on their dime.” Posey said raising the recoverable cap would be “completely off the table.”

A spokesperson for Southern District Commissioner Leonard Bentz echoed that assertion. Like Posey, Bentz has historically supported the plant. “And that’s still the case,” said Bethanne Dufour, Bentz’ director of communications. “(MPC) said they could build this plant for under the cap, and that’s what he expects them to do.”

Northern District Commissioner Brandon Presley said the most recent cost projections are the latest example of MPC not being forthcoming about the economics of the plant. Presley has voted against the plant at every turn, saying its experimental technology is unproven on a commercial scale and its risk to ratepayers is too great.

“It’s obvious that Mississippi Power either can’t tell the truth about how much this plant’s going to cost or doesn’t want to tell us the truth,” he said. The figures are changing with every report. It’s not like you just happen upon this kind of overrun.”

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